Buy out co-owner and avoid capital gains

[Kaylyn T.]

Hi BP community,

I want to buy my co-owner out of a property. Does anyone know if it's possible to pay all cash to take their name off of the deed, thereby avoiding closing costs, refinancing, capital gains, etc? It's a single family home with about 50k left on the mortgage. If it can be done, what are some ways that would work?

Thanks!

Kaylyn

[Frank Jiang]

Originally posted by @Kaylyn T.:

Question - if the current co-owner is no longer on the on the deed and title and no longer owns the house, why would they still legally be responsible for the mortgage? Please clarify if you don't mind.

Thank you! Kaylyn

Because the bank doesn't care who owns the house, they just care about being paid.  The mortgage liability is a completely separate asset to the noteholder.  If the primary borrower can't pay the mortgage, the noteholder will absolutely protect their own interests and go after the partner regardless of whether or not their name is on the deed.

This situation happens all the time in divorce cases where one ex-spouse quitclaims the house to the other but later finds out they can't qualify for a loan because the the mortgage is still under both their names and is killing their DTI.